Update on Alternative Concepts for Determining the Amount of a Colorado Conservation Easement Tax Credit

By Erik Glenn
Executive Director, Colorado Cattlemen's Agricultural Land Trust
Steering Committee Member, Colorado Futures Project

For the past 18 months, a working group of the Conservation Futures Project (CFP) has been exploring alternative methods for determining the amount of tax credits earned by a landowner for donating a conservation easement. The working group is made up of professionals from the land trust community, conservation attorneys, and conservation easement appraisers. The CFP working group is separate from the formal process established by House Bill 1291 during the last legislative session to examine alternative approaches to determining the value of tax credits issued for a conservation easement donation. The formal process established by House Bill 1291 has not yet started. Based on conversations with Division of Conservation Director Mark Weston, we believe that information on that formal process will be broadly distributed before mid-August. The update that follows is meant to keep the conservation community apprised of the progress of the CFP working group, which we hope will help to inform recommendations coming out of the formal House Bill 1291 process.

The CFP working group is currently exploring three options:

Option 1 will explore using an appraiser to establish the “before” value of the conservation easement and public policy to determine the “after” value and the “conservation” value of the easement. The public policy to determine the “after” and “conservation” values may assign ranges based on the restrictiveness of the conservation easement. For instance, an easement with no reserved rights might be determined to be a “restrictive easement” and therefore eligible for a 50% reduction, whereas an easement with a right of subdivision and three building envelopes could be determined to be a “less restrictive easement” and eligible for a 25% reduction. Please note that the examples of reserved rights and percentages are meant to be nothing more than illustrative.  Kevin McCarty (McCarty Land and Water Valuation, Inc.) and Sarah Parmar (Colorado Open Lands) are leading the work on Option 1.

Option 2 will explore using a public data source to establish the “before” value and public policy (as described in Option 1) to establish the “after” and “conservation” values. Public data sources might include, but would not be limited to, the National Agricultural Statistics Service, County Assessor Data, established Geographic Area Rate Caps, etc. Matt Moorhead and Jackson Moller (The Nature Conservancy), Bob Tate (CCALT), and the Colorado Natural Heritage Program are leading work on Option 2.

Option 3 will explore using an ecosystem services approach to establish the “before” value. The ecosystem services approach will also explore a public policy approach for establishing the “after” and “conservation” values. Erik Glenn (CCALT), Colorado State University’s Ag and Resource Economics Department, and the Colorado Natural Heritage Program are leading the work on Option 3.

The goal of the CFP working group is to further develop each option listed above and disseminate information on the options to the conservation community for comment. Feedback from the community will be used to make any appropriate adjustments to the options. In October, the working group aims to present the options – along with a formal recommendation for a preferred option – to the CFP Steering Committee and the CCLT Board of Directors, who will eventually make a formal recommendation on behalf of the community through the formal House Bill 1291 process.

For more information on the CFP Working Group or any of the options, please do not hesitate to contact Erik Glenn at either (317) 407-4295 or eglenn@ccalt.org.